The final chapter?

June 30, 2005

Adesa, (KAR), which has been something of a regular on the blog as the result of a lawsuit filed by the son of the company’s No. 2 executive and then the subsequent resignation of that executive as detailed here has apparently come to terms with James Hallett, 51, its former No. 2 who stepped down in early May. Hallett’s son, Sean, claims that Adesa owes him $6 million. The company has filed a countersuit and says that Junior defaulted on $1.7 million in loans.

According to the older Hallett’s severance agreement in an 8-K filed earlier this week, he’ll continue to collect a regular paycheck from Adesa through April 2007. It’s not quite the $2 million I surmised a few weeks ago since Adesa is only giving Hallett 16 months of severance and 50% of his annual bonus, instead of the more typical three times deal. But Hallett won’t be subsisting on Ramen noodles. The real money comes from the more than 500,000 options that the agreement gives him until May 2008 to exercise. Based on the most recent proxy, most of those options are already in-the-money.

The other curious thing about the agreement is that is doesn’t say anything about the pending lawsuits, which a Q last month disclosed that arbitration between the two parties had failed. And while the agreement says the older Hallett can’t disclose confidential information, does anyone really believe that now that his severance is fixed, he won’t be willing to help out Junior?

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